S&P rating on South Canterbury Finance unchanged after strong operating performance
Standard & Poor's Ratings Services said that its BBB-/Stable/A-3 counterparty credit ratings on New Zealand finance company South Canterbury Finance Ltd. (SCF) remain unchanged, following SCF’s announcement of a strong 29% increase in pre-tax profit in fiscal 2007 to NZ$51m.
According to Standard & Poor’s Rating Service, the strong profit in fiscal 2007 was supported by good net interest margins on the back of strong loan growth of about 24% to NZ$1.3bn. In addition, the strong operating performance is underpinned by SCF’s good operating efficiency and well-maintained credit costs.
Nevertheless, current disruptions caused by the failure of some finance companies, which are being placed in receivership or liquidation, may increase pressure on liquidity and growth in the broader market.
However, Standard & Poor’s expects that SCF’s good funding and liquidity position will be able to contend with these challenges. Although most of SCF’s funding is sourced from the retail debenture market, it has recently maintained a strong retention rate of at least 70%.
Furthermore, SCF’s liquidity position is supported by access to secured credit facilities amounting to NZ$150m from two major banks in New Zealand. About 9% of the company’s balance sheet is represented by liquifiable assets.
30-Aug-2007